Estate Planning

02/07/2017

Many people come into our Houston estate planning law firm seeking to pre-plan their funeral so that they can relieve their loved ones of the burden of doing so when they are gone. Because of the growing demand for funeral pre-planning, local funeral homes are also responding by offering different plans that allow people to pre-plan the service they would like, pick out a casket, and even pay for everything in advance. Pre-planning your funeral here in Texas can be a wise idea, but you might want to think twice before pre-paying for your final expenses in advance.

You should be aware that here in Houston the state of Texas, there are rules that often require the funeral home to invest the money paid to them so that it is available when needed. Some funeral homes put that money in a trust fund or buy an insurance policy naming itself as beneficiary. With that said, if you are considering a pre-paid plan, you should find out the following:

If your funeral home goes out of business, will you lose part or all of your investment?

If you move out of the area, is there a penalty or complete loss of your plan?

If the funeral home invests the money you pay them, do they get to keep the interest or do you?

Can you change or cancel your plan?

If you sign up for a payment plan and you die before it is complete, does the funeral home have an insurance policy that will cover the remaining costs?

Because pre-paying your funeral here in Texas often comes with risks and a lot of “unknowns”, an alternative (and sometimes better option) is to work with an attorney to create a trust which will allow you to provide detailed instructions about your final wishes and set aside funds to cover the expenses. This is all set up and controlled by you, removing the funeral home as the middle man, while still providing you with the same same peace of mind that your end-of-life affairs are taken care of.

01/02/2017

We have all heard stories of families that found themselves in a tailspin because a loved one passed away or became incapacitated without a proper estate plan. No matter what your age, you could really leave your family with a mess to clean up during an already very emotional time if you get sick or die without the right legal documents in place. It is important to help make things as easy as possible for the people you love by having your affairs in order. Here are five documents to consider creating right away.

Last Will and Testament and/or Living Trust

A will is a document used to leave instructions about what should happen to your property after you die. In addition, you can use a will to name guardians for your minor children and even your pets. Depending on your situation, a Living Trust may add another layer of protection and control to your planning while allowing your family to avoid the potential costly (and slow!) probate process after you die. Your loved ones will be relieved to know that your final affairs will be administered smoothly using these documents and that they are properly carrying out your wishes.

Durable power of attorney

A power of attorney allows you to choose someone to act on your behalf financially and legally in case you cannot make decisions. If you do not designate someone, your loved one’s hands could be tied if you are incapacitated. Many people put off creating a durable power of attorney because they think they are relinquishing control. This is not necessarily the case, as you can create a power of attorney that only takes effect if and when you are incapacitated if this is an issue for you.

A medical power of attorney or living will

This document is different from the power of attorney described above. The medical power of attorney allows someone to make medical decisions for you if you are incapacitated or otherwise unable to communicate to medical professionals. A living will also allows you to explain in advance what type of care you do or do not want in all types of medical situations.

List of important documents

Make a list directing your family on how to find all of your financial and legal documents. The list should include life insurance policies, annuities, pension or retirement accounts, bank accounts, divorce records, birth/adoption certificates, real estate deeds, stocks, bonds, and mutual funds. If possible, include a list of bills and accounts so that someone can settle and close them.

If you do not have these documents in place, call our Houston Will and Trust Lawyers today to find out how easy and quick the process can be. Not only will your family benefit from your thoughtfulness, but you will be able to make your own decisions instead of leaving them to the courts. Schedule a consultation by simply calling 281-218-0880.

The Connecticut probate court administrator notes that it’s common for banks to frustrate the purpose of estate planning by rejecting power-of-attorney forms (POAs) when a senior or a disabled individual doesn’t have the competency to execute a form that would meet the bank's standards.

The reason for a durable power of attorney is to plan ahead, but if a bank won't accept the power of attorney, the purpose of the document goes awry. The new law makes certain this won’t happen due to the whim of a bank teller.

With the law change in Connecticut, family members can now go to probate court to enforce POAs and be awarded attorney fees and costs if a bank isn’t following the law. These judges have been granted new authority to compel financial institutions to accept POAs. In contrast, bank employees can also petition the court to review the actions of a person who has a POA if they are concerned that the person who granted the POA is being exploited.

Connecticut now joins 20 other states that have enacted a model law, so it should be easier for elderly people who relocate to be closer to their caregivers and family in other states to have their POAs recognized.

The new law also expands the authority of state’s probate courts to handle those abusing the POA they’ve been granted. Because of abuses by those trusted to act on behalf of the person who granted the POA, the category of people who can raise concerns about POA abuses has been expanded. Now a caregiver or a person who "demonstrates sufficient interest in the principal's welfare" can petition the court to review the actions of a POA agent. Those who abuse the POAs they’ve been granted also now can be ordered to reimburse for financial losses.

11/28/2016

When planning for college expenses, tax-advantaged 529 accounts can be an effective savings tool. However, many individuals have questions about the state-sponsored plans, which typically invest in mutual funds. A Wall Street Journal article asks “Can You Use the ‘529’ Money for Grad School?”

Here are some of answers:

Grad School Use. Yes, 529 funds can be used for graduate school.

An Unused 529. If a child receives a scholarship, you’re allowed to withdraw that amount from a 529 without any penalty. But if that money isn’t used for educational expenses, there is income tax liability on any earnings. In the event a child who graduated several years ago still has money in her 529 account because of a large scholarship in college, the owner can still withdraw the amount of the scholarship from the 529 account without paying tax or penalty. However, there will be income taxes on any earnings. There’s no requirement that you withdraw money from the 529 in the same year you receive a scholarship, but it’s a good idea.

Change of Beneficiary. You can change the beneficiary to any direct relative of the original beneficiary and this can be done at any time.

Estate Planning. To find out how ownership transfers work with your estate plan, you should talk to an experienced estate lawyer, as 529 plan rules can differ. Some plans let you name a successor owner or contingent account holder. At death, ownership would transfer to that person. There is an exception where the parents have made a five-year lump-sum contribution to “superfund” a 529 plan and avoid paying federal gift taxes. In that instance, if the parents die before the end of the five-year period, there could be estate taxes.

Gift-Tax Exclusion. Instead of using a 529 account, a grandparent could use the gift-tax exclusion to help grandchildren pay for college expenses. You’re permitted to give a grandchild (or anyone else) up to $14,000 a year without having to file an IRS gift tax form. You can also pay the school directly without gift tax consequences. However, some institutions will deem this type of payment to be student support. That can mean a dollar-for-dollar reduction in aid eligibility when the student applies for financial aid in the coming year. Note that the gift-tax exclusion for direct payments to colleges only covers tuition, but withdrawals from a 529 account can also cover qualified educational expenses like computers, room and board, and books. Another thought is to contribute to the student’s 529 plan, which is assessed at a lower percentage than student income in the financial-aid calculation—this will have less of an impact on aid reduction.

Any withdrawal from a 529 plan that doesn’t qualify as educational will incur income tax on any earnings, but if the withdrawal is because of offsetting scholarships the student received or other exemptions, there are no penalties.

11/25/2016

The Washington Post’s article, “Think now about what you will leave behind,” notes that a study by Accenture estimates that more than $12 trillion in assets are being shifted from those born in the 1920s and 1930s to baby boomers. Then in the next several decades, about $30 trillion of wealth will be transferred by baby boomers to their heirs.

“At the peak, between 2031 and 2045, 10 percent of total wealth in the United States will be changing hands every five years,” the Accenture report said.

How that money is distributed will matter. Consider long-term care insurance, a significant expense. Some adult children don’t want to spend the money their parents saved because they might be criticized by other heirs about reducing their inheritance. In many cases it’s the adult daughter who holds a full-time job and would take care of her mother before work and after. But soon she needs some help. And even though mom has money to pay for long-term care, the daughter’s hesitant to spend it because her out-of-state siblings give her grief about the cost.

Frequently family members who are the caretakers are given little or no consideration for the time they spend providing care. The estate’s split up evenly, which can be a source of resentment. Try to avoid estate battles. An elder law attorney can draw up a family agreement in advance regarding who will be responsible for care and what they’ll be paid. They will be paid for their time and effort during their service, or if that’s not an option, they’ll receive compensation in the estate plan.

Of course, a person is free to do whatever they want with their money. But think about the stress and conflict that may occur if you intentionally leave an adult child or children out of your will. Think of the personalities of your children and the resentments, along with potential litigation, your estate plan may cause if your assets aren’t divided in a manner that your kids think is just. Let your children know that fair is sometimes not the same as equal.

11/22/2016

If you are facing the issue of finishing your life with too much money, you probably know there are only three groups that will lay their hand on your surplus: the government, your family, and your preferred charities. Most folks will agree that it is best to leave the least legally allowed to the government, but then what to do about dividing your assets between the other two?

Those facing a wealth surplus worry about passing on their assets only after their deaths, rather than while they're alive, and they worry about the potential negative effects of inherited wealth on their children. But these worries conflict with two well-known estate-planning principles. One is the fact that giving away money during your lifetime instead of at your death is the most efficient way to minimize taxes on transferring your wealth. And second, the key to lowering stress in estate planning is to place your personal values in the middle of the plan.

If it's all about your kids, let them have the money. On the other hand, if you have other values you want to express in addition, you should consider donor-advised funds. DAFs offer some advantages in a simpler and inexpensive way for those whose estate won’t need complex intergenerational wealth planning.

Most major brokerages and investment firms offer DAFs, which can be an economical way to accomplish an expression of your values in your lifetime and beyond, without a legal structure like a foundation or trust. When you contribute to a DAF:

You get to enjoy a charitable gift tax benefit in the year of your gift.

Assets will continue to grow in value, tax free, over time.

You don't need to designate all of your charitable beneficiaries now because your appointed trustees can designate gifts to charities over time.

Giving takes just a call to the brokerage firm, which then confirms the recipient charity is legitimate.

What the DAF gives you is time to enjoy giving while you’re still alive. You get to make future decisions and have discussions with your children about your values. You also have the opportunity, during your lifetime, to see the impacts of your gift. You can give your assets to the DAF this year, enjoy the tax advantages of that gift now, and spend the future giving to worthy causes.

11/21/2016

The National Football League said “no” to New Orleans Saints owner Tom Benson's original proposal to remove team ownership from his estranged family's trust funds. This means he’ll have to try again with new financial terms.

The 89-year-old Benson disowned his daughter and two grandchildren after a bitter fallout a few years ago. According to Benson, he intends to leave full ownership of the Saints to his wife Gayle and has been trying to revoke the trust funds' shares.

Benson sued in federal court after the trustees guarding the funds blocked his attempt to remove assets in exchange for 30-year promissory notes, including about $375 million for the team’s shares. The offer also includes an attempt to remove shares in the Pelicans, the NBA franchise he also owns. The trust funds allow for assets to be removed, but only in exchange for other assets of equal value.

Court filings show the NFL's finance rules won't allow Benson to use his personal wealth, which includes his controlling, voting stock in the Saints, to back the proposed promissory notes. With that arrangement, the trusts could try to seize Benson's personal assets—including the controlling stock—if he were to default on the notes.

The trustees, attorneys Robert Rosenthal and Mary Rowe, and Benson announced this summer that a tentative settlement was reached. The promissory notes in the exchange were contingent on NFL approval. In August, a U.S. District Judge scheduled a trial after settlement talks didn’t result in a final agreement.

Benson recently filed an amended lawsuit with a new offer of promissory notes based on a January 2015 value of the team. Rowe's attorneys responded, claiming that because the NFL rejected Benson's first offer, any new deal must be based on the current value of the teams, which would be higher.

Rowe has asked a judge for a hearing on the issue. Benson's attorney says his client has a right to change the notes offered in January 2015. A trial is scheduled for February 6.

11/17/2016

We all want to put this off: who wants to think about their own death—and then plan for it? Even though it’s a bit uncomfortable, detailing what will happen to your assets will let you be assured that your assets will go to the right people and places.

A recent article in The Week asks “When should I write a will?” According to the article, here is a list of some life events that provide good reason to write a will:

You had your 18th birthday. In most states, you’re a real adult, and this is your first opportunity to write a legally valid will.

When you’ve saved up some money or assets. Of course, the concept of "some money" will be different for everyone. The point is that if you die without a basic will, you'll be "intestate." If that happens, your estate will be settled in accordance with state law, which will determine who inherits your assets. The way in which those assets will be divided among heirs varies from state to state, so without your specific instructions, they might end up being distributed very differently than you wanted.

When you get married… or divorced… or remarried. These changes are important reasons to write or rewrite your will. Some state laws say that if you had a will before your marriage, it may be invalid when you wed.

When you have kids and when they grow up. A will guarantees your children are provided for exactly the way that you intend. You should name a guardian for your minor children in the event that both parents die. All this may change when they become adults, and you may even want to name one of them to be your executor.

When you start a business. You should consider your succession plan, if you want family or someone else to take over the business. If you leave the company to several individuals, think about what share of the business will go to each.

You purchase a home. This is going to make a big change in the worth of your estate and could impact the beneficiaries you choose to name and how much you leave them. In some instances, purchasing a home means a move to a new state. You need to consult an estate planning attorney about the laws for wills for your new state.

It's been how many years? There will be numerous variables that can affect how you opt to distribute your estate. These include changes in personal priorities, family relationships, as well as tax and estate regulations. You need to review and update your estate planning documents every few years.

11/16/2016

Insurance. These regulations are frequently at the country or state level, so insurance that is valid or that can be sold in one jurisdiction may often not be sold or used in another. If you are a resident of two countries, and each has mandatory health insurance, it may be difficult to locate a provider whose insurance is accepted (for medical and tax purposes) in more than one country. Long-term care and disability policies are often not valid or have reduced benefits outside of the country where they’re purchased. Life insurance, if issued some time ago, can usually be kept when you move overseas—but you may see some currency risk and financial regulations for policies with a cash or investment account associated with them. Auto insurance isn’t typically portable.

Investment Planning. These regulations vary by country, so be certain to work with people who understand your situation and are competent to provide cross-border services. U.S. expats should know that most foreign investments may be subject to punitive U.S. taxation and costly compliance. Investing in U.S. exchange traded funds or individual stocks is usually a better option, with U.S. mutual fund investments generally off-limits to investors living outside the U.S.

Estate Planning. These laws are different from one jurisdiction to the next. With an international move, your estate planning may no longer be valid, so talk with an experienced international estate-planning attorney.

Government Benefits. You should learn in advance if health coverage like Medicare, unemployment insurance, welfare, and other government benefits will be available when you move overseas. If you’re being asked to move for your employment, check your employment agreement to see what types of government benefits you will be eligible for if you are terminated from the position while overseas. If you’re planning to retire abroad, you won’t be able to use Medicare—you’ll need to make alternative health care arrangements. Find out if you can have your Social Security benefits paid to you while living abroad.

It’s a rite of passage to buy life insurance before your first race. However, Patrick has more personal reasons. Her parents were in favor, as each lost their fathers during childhood and witnessed the financial stress placed on their families. They managed the risk with life insurance and saving six months’ worth of expenses for an emergency.

As far as Patrick is concerned “she didn’t want to leave people with bills they can’t pay, and not only dealing with the sadness of a loss, but trying to figure out how you’re going to manage the rest of…life.”

Life insurance allows us to deal with personal loss without compounding it with financial stress. The suggested policy for most families is a term life insurance policy with a death benefit that is approximately 15 times their annual income.

With term life insurance, many life insurance needs will expire, assuming that a family is on track to reach financial independence around retirement age. The specific term of your policy should last at least through the children’s college years—and at most through the age at which you can reasonably expect to be financially independent.

If you want to create an estate, fund charitable bequests, replace an estate lost to taxes or build cash value, you will need some type of permanent life insurance—whole life, universal life, or variable life. Note that permanent life insurance creates additional financial complexity and can be expensive.

If you have a spouse or minor children, you have loved ones relying on you financially. Term life insurance can be pretty inexpensive. And even if you’re not a racecar driver, you face one of life’s most common risks—riding in or driving a motor vehicle.

As Patrick remarked, “It’s probably pretty uncommon to come across someone that hasn’t been in some kind of a car accident. Now, there are surely varying degrees, but you’re not wearing a six-point harness with a helmet on and an ambulance sitting nearby. So, it’s a risk no matter what you do if you’re driving anything.”